Did Changing Sentiment Drive Fission Uranium’s (TSE:FCU) Share Price Down A Worrying 60%?

Statistically speaking, long term investing is a profitable endeavour. But that doesn’t mean long term investors can avoid big losses. For example, after five long years the Fission Uranium Corp. (TSE:FCU) share price is a whole 60% lower. That’s not a lot of fun for true believers. And it’s not just long term holders hurting, because the stock is down 23% in the last year. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.

See our latest analysis for Fission Uranium

Fission Uranium didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). We can’t help wondering why it’s publicly listed so early in its journey. Are venture capitalists not interested? So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that Fission Uranium will discover or develop fossil fuel before too long.

We think companies that have neither significant revenues nor profits are pretty high risk. There is almost always a chance they will need to raise more capital, and their progress – and share price – will dictate how dilutive that is to current holders. While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Fission Uranium has already given some investors a taste of the bitter losses that high risk investing can cause.

When it last reported its balance sheet in December 2018, Fission Uranium had net cash of CA$20m. That’s not too bad but management may have to think about raising capital or taking on debt, unless the company is close to breaking even. We’d venture that shareholders are concerned about the need for more capital, because the share price has dropped 17% per year, over 5 years. You can click on the image below to see (in greater detail) how Fission Uranium’s cash and debt levels have changed over time.

TSX:FCU Historical Debt, April 26th 2019
TSX:FCU Historical Debt, April 26th 2019

In reality it’s hard to have much certainty when valuing a business that has neither revenue or profit. Given that situation, would you be concerned if it turned out insiders were relentlessly selling stock? I would feel more nervous about the company if that were so. It costs nothing but a moment of your time to see if we are picking up on any insider selling.

A Different Perspective

While the broader market gained around 6.0% in the last year, Fission Uranium shareholders lost 23%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 17% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

But note: Fission Uranium may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.